MDS reports 47% decline in nine months net profit

February 13, 2020

Medical Disposables & Supplies Limited, for the nine months ended December 2019 reported Revenue amounting $1.73 billion, an increase of 9%, relative to $1.58 billion booked the previous year. For the third quarter revenues totalled $603.36 million up 12% year over year (2018: $538.67 million). MDS noted, “This improved performance was influenced by increased sales in all three business divisions of the Company.”

Cost of sales went up 9% to close the period at $1.33 billion relative to the $1.21 billion reported for the same period last year. This resulted in gross profit which increased 9% to a total of $398.89 million relative to the $366.08 million for the corresponding period in 2018. This increase “resulted from increased sales arising from the introduction of new product lines and the increase in market coverage”, as stated by the Company. Gross profit for the third quarter amounted to $124.60 million, a 0.03% improvement compared to the $124.56 million reported in 2018.

Total operating cost closed the period at $312.25 million, up 18% (2018: $263.56 million). The Company stated, “This increase was accounted for mainly by increases in the staff complement as well as increased selling and distribution costs which are required to support the increase in business activity.” Of this, selling and promotional costs went up 23% to $126.38 million (2018: $103.10 million). In addition, administrative expenses increased by 12% to $163.88 million from $146.82 million documented in the same period last year. Notably, the company booked other operating income of $4.33 million for the period ended December 31, 2019 relative an income of $4.08 million of the same period in 2018. Depreciation for the nine months amounted to $21.93 million, 20% more than the $18.34 million reported in 2018.

As such, operating profit amounted to $86.64 million (2018: $102.52 million). For the quarter, operating profit closed at $19.79 million versus $30.18 million booked in the prior corresponding quarter.

The company’s loss on foreign exchange was reported at $32.82 million compared a loss of $20.10 million in 2018. Finance cost decreased by 25% to total $21.96 million (2018: $29.29 million). Furthermore, Gain on disposal of property, plant and equipment was $1.15 million (2018: $1.51 million).

As a result, MDS reported profit before tax of $33.32 million, a 39% decrease relative to the $54.66 million in 2018. For the quarter, profit before tax closed at $6.95 million (2018: $19.79 million).

Consequently, net profit for the period amounted to $29.17 million relative to $54.63 million in 2018, a 47% decrease year over year, after a tax charge of $4.16 million for the period. Net profit for the quarter amounted to $6.53 million (2018: $19.79 million).

Earnings per share for the period amounted $0.11 (2018: $0.21). EPS for the quarter amounted to $0.03 relative to $0.08 in 2018. The trailing twelve-month EPS amounted to $0.33. The number of shares used in the calculations is 263,157,895. MDS last traded on February 12, 2020 at $ 6.03.

The Company also noted, “despite operating in a competitive business environment, we continue to realign our business strategies to focus on more market penetration and strengthen relationships with our customers, shareholders and MDS family.”

Balance Sheet at a glance:

As at December 2019, total assets amounted to $1.69 billion 11% more than $1.52 billion the year prior. This was primarily due to a 21% increase in ‘Inventories’ and a 26% increase in ‘Prepayments’ which amounted to $630.90 million (2018: $521.75 million) and $132.16 million (2018: $104.64 million), respectively.

Shareholders’ Equity totalled $759.43 million (2018: $700.39 million) resulting in a book value per share of $2.89 (2018: $2.66).

Analyst Certification -This research report is for information purposes only and should not be construed as a recommendation. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.

Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.